No proposal to relax borrowing limits for Kerala, other states: Sitharaman

Finance Minister Nirmala Sitharaman on Monday said there is no proposal to relax the existing terms for borrowing capacity of state governments, including Kerala for 2023-24.

Kerala has requested the Centre to allow an additional borrowing equivalent to one per cent of Gross State Domestic Product (GSDP) over and above the borrowing ceiling fixed for 2023-24 fiscal year.

In a reply in the Lok Sabha, Sitharaman said the Centre applies a common yardstick while fixing the annual borrowing limit of all state governments under Article 293(3) of the Constitution.

In doing so, it is guided by the recommendations of the Finance Commission, she said.

To a question on whether the Centre proposes to relax the existing borrowing terms considering the financial crisis of Kerala, Sitharaman replied in the negative.

For current fiscal year, the gross borrowing ceiling of Kerala has been fixed at Rs 47,762.58 crore. Out of this, Rs 29,136.71 crore is Open Market Borrowing (OMB) while the rest is borrowing from other sources.

Out of the total OMB, consent has already been given to borrow an amount of Rs 23,852 crore so far, Sitharaman said. Borrowing from other sources is resorted by the state government from time to time as per its requirements.

An amount of Rs 36,231 crore has been provided to the Kerala government as Revenue Deficit Grant from 2021-22 to 2023-24 (till November 2023).

Additionally, to help states enhance their capital expenditure and managing liquidity stress, the Centre is providing 50-year interest free loan to state governments since 2020-21 under Scheme for Special Assistance to States for Capital Expenditure / Investment.

"An amount of Rs 2,141 crore has been released under the scheme to the state government of Kerala during FY 2021-22 and FY 2022-23," Sitharaman added.